Malaysians, banks agree on crucial issues on NSC debt restructuring

Malaysian holding firm Pengurusan Danaharta Nasional Berhad and local creditor banks have agreed on four crucial issues on debt restructuring and debt-to-equity conversion agreement for the beleaguered National Steel Corp. (NSC).

Trade and Industry Secretary Manuel Roxas II said yesterday that Danaharta, the consortium of local creditor banks and the liquidators of NSC reached a verbal agreement in Kuala Lumpur last week.

Following the verbal agreement, Roxas expressed confidence that "this will be translated into actual documentation which will then be formally signed by all parties involved."

"The four crucial issues on which all parties agreed on include management of NSC, any sale of assets, any change in core business of NSC, and sale of NSC shares to a third party," Roxas said.

Sources said that under a planned debt restructuring and debt-to-equity conversion agreement, the creditor banks will have to agree to convert a portion of NSC’s outstanding debt into equity in the steel firm.

NSC’s outstanding debt to a group of local banks has ballooned to about P16 billion.

Because of the debt-to-equity conversion, the existing majority shareholder–Danaharta–will also have to agree to a major "haircut," resulting in the reduction of its controlling stake in NSC from 82.5 percent to a minority of 20 percent.

The sources, however, said that in allowing the dilution, Danaharta will still be given equal voting rights on the four major issues involving management, sale of asset, change in core business and sale of shares to a third party.

They said the debt restructuring and debt-to-equity conversion is expected to finally lead to a rehabilitation and reopening of NSC.